- In this video, we'll discuss a common measure…of forecast accuracy, the MAD,…or the mean absolute deviation.…And so, if you want to follow along with me,…you should open up the file MAD start…in the chapter two, video two folder.…So, what you see here is basically six months of data.…You're given actual sales, and you're given a forecast.…And the definition of MAD or mean absolute deviation…is highlighted in yellow in row one.…Simply, you compute the error for each observation,…and you average the absolute value of the errors.…

So, if you recall from high school algebra,…what does absolute value mean?…The absolute value of a number is simply…the distance of the number from zero.…So, the absolute value of five is five.…The absolute value of minus five is also five,…and you'll see why it's important…to take absolute value in a minute.…So, our plan of attack is to compute…the error for each forecast.…Recall, error is actual minus forecast,…and then we'll take the absolute value of the errors…and then simply average them to get the MAD.…

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Author

Released

9/5/2014

Professor Wayne Winston has taught advanced forecasting techniques to Fortune 500 companies for more than twenty years. In this course, he shows how to use Excel's data-analysis tools—including charts, formulas, and functions—to create accurate and insightful forecasts. Learn how to display time-series data visually; make sure your forecasts are accurate, by computing for errors and bias; use trendlines to identify trends and outlier data; model growth; account for seasonality; and identify unknown variables, with multiple regression analysis. A series of practice challenges along the way helps you test your skills and compare your work to Wayne's solutions.

Lynda.com is a PMI Registered Education Provider. This course qualifies for professional development units (PDUs). To view the activity and PDU details for this course, click here.The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.